What: In spite of having invented the format, the hypermarket model is not as competitive as it used to be in the US.

Why it is important: Hypermarkets are facing the same kind of leaner, smaller and more local competition than department stores. Anything happening there might be a lesson to learn for the department store format too, especially when food is part of the offer.

The US are the cradle of the supermarket business model, and the industry is extremely efficient there, with the ability to work on low margins when compared to the rest of the world. However, their efficiency is now at stake, as customers are under pressure to support increasing retail prices now that grocers are not able to buffer the food price hikes. It was estimated in 2017 that the cost of eating healthily is 67% more expensive in the US than in the UK. Today, Americans spend more than Europeans in food, end eat less healthily cheaper food. The size of the hypermarkets is also bigger, meaning more references, but also more waste and costs, leading to a lower sales per square meter ratio than in the UK. Add to this an outdated process (with people employed to bag groceries for the customer, a nice tradition but which is costly), the lack of a national champions (in Europe, hypermarket chains have more power to negotiate prices with suppliers due to their size), and the cocktail becomes explosive.

The Economist points out that with the increasing competition (Aldi from Germany and its smaller stores, Amazon and the notion of dark stores and “Fresh” supermarkets) might lead to a structural reformation of the US industry.

Why Americans are poorly served by their grocery stores